Back in the late 1990’s, the Houston-based energy trading company, Enron, went on a lobbying and campaign contribution spree in the Maryland General Assembly.
Enron spent about $100,000 a year wining and dining state lawmakers in a successful effort to get them to approve legislation the company helped write to deregulate the electricity utility industry. Enron sold deregulation in state capitals across the U.S., despite protests from consumer advocates and environmentalists.
The big idea – fashionable even among Democrats in Clinton era – was that government was bad, and that deregulating electric utilities would unleash the magic of free-market competition. Deregulation would allegedly save consumers money on their electric bills by allowing them to choose from a wide-open field of new electricity retailers.
After convincing Maryland to adopt Enron’s system in 1999, Enron – about two years later – collapsed into bankruptcy and criminal fraud.
Two decades later, the numbers are in – and the data show that electricity deregulation was a massive ripoff for consumers. According to an in-depth study published this month by the Wall Street Journal, consumers paid billions more over a decade than they would have with traditional regulated utilities.
Here’s Maryland State Delegate Brooke Lierman of Baltimore.
“Deregulation without protection is a recipe for higher prices,” said Lierman, a Democrat. “So I do think that deregulation is not the kind of panacea that many people thought it would be in the 1990’s. I think we’ve learned a lot, since then.”
In Maryland in 2019, an average family with a traditional utility like BGE that switched to an alternative electricity supplier – with a name like Great American Power or NRG ZOOM -- would have paid roughly $200 – or 15 percent -- more annually for the exact same electricity.
Families that chose retailers advertising green or renewable electricity paid approximately 30 percent, or $400, more annually on average than traditional utility customers.
These estimates come from Laurel Peltier, co-founder of the Energy Supplier Reform Coalition, which is supported by AARP, Public Citizen, Chesapeake Physicians for Social Responsibility, and other nonprofit organizations advocating for consumers and the public interest.
“There is a group of suppliers whose business model is 100 percent renewable,” said Peltier. “And they tend to focus on houses that are eco-conscious. And those homes pay significant premiums. And the suppliers are selling renewable energy certificates. Is there any reporting? No. Is it transparent? No.”
Worse yet, many unregulated electric retailers have been targeting elderly, poor and minority residents with aggressive, deceptive and predatory sales tactics. The pitches disclose that rates may later go up only in confusing, fine print. This is according to state Senator Mary Washington of Baltimore.
“There is no question – when you look at the data, it’s African American, low-income communities that are being targeted,” said Washington, a Democrat. “In the middle of Covid, they were encouraging people to switch to these third-party energy companies with variable rates, without a lot of disclosure. It’s just unconscionable that was allowed to happen, and continues to happen because of de-regulation.”
To help address the problem, Senator Washington and Delegate Lierman introduced bills (Senate Bill 31 and House Bill 397) that would require retail companies selling electricity to lower-income families that receive state energy assistance to charge no more than a traditional utility.
The bills are opposed by retail electricity companies, who argue that the real problem is poorly-educated consumers.
Despite the opposition, the Washington/Lierman consumer protection legislation passed the state House by a preliminary vote of 92 to 38, and the Senate by a vote of 46 to zero. After minor differences between the House and Senate versions of the bill are worked out, and final votes are taken, the bill will move on to Governor Larry Hogan for his signature.
To be sure, the bill would only protect a small portion of families from rip-offs – only the 30,000 Maryland households receiving state energy assistance.
But advocates say it is a step forward toward fixing a bigger problem, and that it should be a lesson to all of us. We should think twice when lobbyists come selling free-market de-regulation as if it will free us from anything but the cash in our wallets.
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The Environment in Focus is independently owned and distributed by Environment in Focus Radio to WYPR and other stations. The program is sponsored by the Abell Foundation. The views expressed are solely Tom Pelton's. You can contact him at [email protected].